CMC has worked hard to accommodate ETYFA’s requests, so why is ETYFA still refusing to pay for all the changes?
ETYFA engaged CMC to build the Vasilikos LNG facility in December 2019. This includes the Jetty linking the FSRU Vessel to onshore facilities.
CMC has been working hard for years, despite the COVID-19 pandemic, despite non-payment by ETYFA, CMC has achieved a lot. Anyone driving between Limassol and Larnaca on the main road will see the massive jetty ‘pilings’ already sitting in the water at
Vasilikos with many more pilings stacked and ready to be installed plus other works taking shape on land.
Aside from ETYFA’s unexplained refusal to take delivery of the completed FSRU vessel sitting ready in Shanghai, another major dispute between the parties concerns the Jetty itself.
Although the parties’ disagreement over the Jetty has existed for several years now, CMC has not made public statements on this matter and has instead focused as far as possible on finding practical solutions for the good of the Project. However, ETYFA’s continued disengagement from attempts to resolve this matter make it impossible for CMC to remain silent.
ETYFA has hugely changed what it asked CMC to build. The crisis ETYFA has created centres on the Jetty. Put simply, CMC signed a contract to design, build and operate one kind of project (importing LNG and turning it into gas) but ETYFA later insisted CMC build something fundamentally different (a facility capable of exporting LNG). This is a radical departure from the parties’ original agreement for CMC to build an LNG receiving and regasification facility.
Unlike the relatively more simple process of importing LNG, by converting it back to gas on the FSRU and sending it to shore along a conventional pipe on a jetty, an LNG export facility relies heavily on state-of-the-art ‘cryogenic’ technology involving the
cooling of natural gas to extremely low temperatures, transforming it into a liquid state, known as LNG. This process is essential for the efficient and safe export of natural gas across vast distances. But that technology for exporting LNG brings with it a huge variety of new technical considerations and costs and this ETYFA demand has had a colossal impact on CMC’s Jetty works.
ETYFA has demanded not merely the ‘potential’ to add cryogenic capability in the future but essential cryogenic capabilities from Day 1 in terms of the Jetty design and construction. This has had an enormous impact on CMC’s for which CMC is entitled to
be compensated.
Although CMC has worked hard to accommodate this very different ‘Day 1’ capability forced on it by ETYFA, many other elements would need to be built over many years for LNG export ever to be required at the Vasilikos facility. LNG export is a very long way
off in the future for Cyprus (if it ever happens) but still ETYFA has insisted the Vasilikos jetty design and construction be ready for it.
For Cyprus to embarking on such a monumental project of LNG export would be a significant financial undertaking and would have costs that could reach many billions of Euros. The timeline for such a project would probably extend well beyond a mere six
years, underscoring the sheer magnitude of the endeavour.
Despite the easily-imagined difficulties that ETYFA’s changes forced on CMC, CMC has been doing what ETYFA asked. The issue now is that ETYFA must pay CMC for the vast amount of extra work and materials consumed by ETYFA’s changed ‘vision’ for the
Project from import to also export, from a gas import project to a much more complicated cryogenic one. ETYFA has up until now refused to address this problem and taken an adversarial approach.
ETYFA has brought this situation entirely upon itself – for an LNG Export dream that may take many more years and many more billions of Euros to achieve (if ever) – is, unfortunately, none of CMC’s concern. CMC has tried its best for ETYFA and the Republic
of Cyprus but the situation for CMC has become severe and is not sustainable from CMC’s point of view.
